Singapore — 0240 GMT: Crude oil futures ticked lower during the mid-morning trade in Asia March 18, after the Energy Information Administration showed a build in crude and product inventories, even as a free-falling US dollar provided some cushion to the market.
At 10:40 am Singapore time (0240 GMT), the ICE Brent May contract was down 38 cents/b (0.56%) from the March 17 settle at $67.62/b, while the April NYMEX light sweet crude contract was down 37 cents/b (0.57%) at $64.23/b.
Against the backdrop of subdued refinery demand amid lingering storm outages, data from the EIA, released late March 17, showed a 2.4 million-barrel build in US crude inventories in the week ended March 12. The counter-seasonal build pushed inventories to 500.8 million barrels, nearly 7% above the five-year average, thereby opening the widest surplus since the week ended Jan. 15.
The build in crude stocks shown by the EIA data put pressure on prices this morning as it came in above analysts’ projections of a 400,000-barrel build, and was contrary to the 1 million-barrel draw shown by data from the American Petroleum Institute released March 16.
The oil complex was also weighed down by EIA’s release of uninspiring downstream data, which showed that in the week ended March 12, US gasoline and distillate inventories had edged up 470,000 barrels and 255,000 barrels, respectively. Analysts had expected gasoline and distillate stocks to slide 1.4 million barrels and 900,000 barrels lower, respectively, amid weak refinery runs.
Despite the bearish EIA data, the market is optimistic over the demand outlook for oil, as vaccines promise to reign in the pandemic, and global economic activity picks up pace. While some concerns remain over Europe, where a number of countries have suspended the Oxford-AstraZeneca vaccine, analysts are especially bullish over the US, where the success of the country’s vaccination drive may encourage travel and boost downstream demand for gasoline and jet fuel.
“Oil was dragged down by a larger-than-expected build with US stockpiles, but energy traders can’t help be optimistic that crude demand outlook will get significantly better,” said Edward Moya, senior market analyst at OANDA, in a March 18 note.
“If the dollar rebound is officially over, crude prices could continue their climb higher,” Moya concluded.
The oil complex has already received some support from the movements in the US dollar, which has been weakening since the US Federal Open Market Commission meeting reaffirmed the Federal Reserve’s dovish stance on monetary policy. At 10:32 am, the June contract for the US dollar index was down 0.441% from the previous close at 91.475.
